According to preliminary data from the Bureau of Labor Statistics (BLS), the number of people employed in the non-farm sector increased by 254,000 in September, with previous data slightly revised upward. Over the past three months, average employment increased by 186,000, by 167,000 over the past six months, by 200,000 over the past nine months of 2024, and by 203,000 over the past twelve months.
Employment Trends
It’s important not to focus on a single, seemingly strong report but rather to understand the trend and nature of employment.
The long-term average for monthly job growth is around 190,000. Between 2017 and 2019, the monthly growth averaged 177,000.
It's necessary to focus on private sector employment, adjusting for total jobs, which naturally rises with population growth.
The six-month average monthly gain was 0.1% of total private sector employment, slightly below the 0.13% gain seen from 2017 to 2019, and lower than the 0.16% average gain from 2011 to 2019. By comparison, the gain was 0.14% in 2023 and surged to 0.27% in 2022, driven by the post-COVID employment recovery.
The growth rate has slowed and is now about 1.6 times the long-term historical average.
When might a crisis hit? Employment trends are typically inertial. Compared to the 2008 - 2009 crisis, the slowdown was long and gradual.
Labor Market Cooling
The current cooling in the labor market is around 0.08% to 0.1%, similar to what occurred in 2007 and 2000.
Following the cooling phase, which usually lasts 6 to 12 months, the stagnation phase (where job growth is close to zero) typically lasts another six months. After this comes the crisis phase, characterized by three consecutive months of job losses.
During the 2008 - 2009 crisis, the job-cutting phase lasted 26 months, from January 2008 to February 2010, resulting in a loss of 8.8 million jobs, or 7.6% of total employment.
In the early 2000s crisis, the continuous contraction phase lasted 15 months, from March 2001, with the overall deterioration stretching from January 2001 to August 2003, leading to a loss of 3.36 million jobs, or 3% of total employment.
The stagnation phase could begin as early as late 2024, with crisis risks potentially intensifying by mid-2025.
Conclusion
In conclusion, while the September employment data appear strong, closer analysis shows a slowdown in employment growth, with gains now below the long-term average. This cooling phase reflects the pattern of previous economic downturns, such as those preceding the 2008 - 2009 and early 2000s crises. Employment growth has slowed considerably compared to the post-COVID recovery, and the current rate of growth, which is now about 1.6 times the historical average, suggests that the labor market is losing momentum. If this cooling continues, we could enter a stagnation phase by the end of 2024, and a full employment crisis could emerge by mid-2025.